I've some gift cards that could help me get this system for around $60 or an Klipsch Energy RC Micro 5.0 for the same price. The Energy micro is without the sub-woofer though. Can you please advise which is a better option ?

I've bought the Onkyo AVX-290 from Best Buy for $160. It's a receiver with 5.1 speaker system. I thought it's a good deal, but it looks like the speakers may not be great.

My other option is :

HK AVR 1700 + one of the two speaker systems discussed above.

Please help and please note that I am trying to get a budget system for now. Thank you.

Not really an upgrade at all. You'd be better off keeping your Onkyo receiver and wait for a sale on cheapo bookshelfs like the Polk Monitor 30's and a CS1 center and spend some money on a subwoofer like the Polk PSw505